n">(Reuters) - Rising foreclosures and delinquent real estate mortgages are threatening the credit quality of New Jersey's local governments, Moody's Investors Service said.
Cities, towns and other local governments in New Jersey and many other states rely on property tax collections as their main source of revenue. Abundant foreclosures keep the taxable value of property low, hurting that funding source, Moody's said in a commentary late Thursday.
New Jersey has the second highest percentage of foreclosures in the United States behind Florida, Moody's said, citing an August report by the Mortgage Bankers Association.
And the percentage of seriously delinquent mortgages increased by 2.4 percent in New Jersey in the second quarter of 2012, while they declined nationally, Moody's said.
"Foreclosure rates in the state are likely to stay higher than the national average over the medium term because New Jersey's practice of administering foreclosures through the courts tends to be a slow and cumbersome process that tends to be prone to backlogs," Moody's said.
The scenario is likely to keep housing prices in the state low for years, because distressed properties usually sell at steep discounts, Moody's said.
The credit rating agency expects New Jersey's economy to recover more slowly than the rest of the nation from the recession.
The state's credit quality is also under pressure. On September 18, Standard & Poor's Ratings Services revised its outlook to negative from stable on New Jersey's "AA-minus" general obligation rating, citing a structural budget imbalance and optimistic revenue assumptions.
In August, the state's jobless rate was 9.9 percent, the fourth-highest rate in the country and the highest rate for New Jersey since 1977.
(Reporting By Hilary Russ; Editing by M.D. Golan)
